You’re
witnessing the death of neoliberalism – from within
Aditya Chakrabortty
Tuesday 31 May 2016
06.59 BST
IMF
economists have published a remarkable paper admitting that the
ideology was oversold
What does it look
like when an ideology dies? As with most things, fiction can be the
best guide. In Red Plenty, his magnificent novel-cum-history of the
Soviet Union, Francis Spufford charts how the communist dream of
building a better, fairer society fell apart.
Even while they
censored their citizens’ very thoughts, the communists dreamed big.
Spufford’s hero is Leonid Kantorovich, the only Soviet ever to win
a Nobel prize for economics. Rattling along on the Moscow metro, he
fantasises about what plenty will bring to his impoverished fellow
commuters: “The women’s clothes all turning to quilted silk, the
military uniforms melting into tailored grey and silver: and faces,
faces the length of the car, relaxing, losing the worry lines and the
hungry looks and all the assorted toothmarks of necessity.”
But reality makes
swift work of such sandcastles. The numbers are increasingly
disobedient. The beautiful plans can only be realised through
cheating, and the draughtsmen know it better than any dissidents.
This is one of Spufford’s crucial insights: that long before any
public protests, the insiders led the way in murmuring their
disquiet. Whisper by whisper, memo by memo, the regime is steadily
undermined from within. Its final toppling lies decades beyond the
novel’s close, yet can already be spotted.
When Red Plenty was
published in 2010, it was clear the ideology underpinning
contemporary capitalism was failing, but not that it was dying. Yet a
similar process as that described in the novel appears to be
happening now, in our crisis-hit capitalism. And it is the very
technocrats in charge of the system who are slowly, reluctantly
admitting that it is bust.
You hear it when the
Bank of England’s Mark Carney sounds the alarm about “a
low-growth, low-inflation, low-interest-rate equilibrium”. Or when
the Bank of International Settlements, the central bank’s central
bank, warns that “the global economy seems unable to return to
sustainable and balanced growth”. And you saw it most clearly last
Thursday from the IMF.
It is the very
technocrats in charge of the system who are slowly, reluctantly
admitting that it is bust
What makes the
fund’s intervention so remarkable is not what is being said – but
who is saying it and just how bluntly. In the IMF’s flagship
publication, three of its top economists have written an essay titled
“Neoliberalism: Oversold?”.
The very headline
delivers a jolt. For so long mainstream economists and policymakers
have denied the very existence of such a thing as neoliberalism,
dismissing it as an insult invented by gap-toothed malcontents who
understand neither economics nor capitalism. Now here comes the IMF,
describing how a “neoliberal agenda” has spread across the globe
in the past 30 years. What they mean is that more and more states
have remade their social and political institutions into pale copies
of the market. Two British examples, suggests Will Davies – author
of the Limits of Neoliberalism – would be the NHS and universities
“where classrooms are being transformed into supermarkets”. In
this way, the public sector is replaced by private companies, and
democracy is supplanted by mere competition.
The results, the IMF
researchers concede, have been terrible. Neoliberalism hasn’t
delivered economic growth – it has only made a few people a lot
better off. It causes epic crashes that leave behind human wreckage
and cost billions to clean up, a finding with which most residents of
food bank Britain would agree. And while George Osborne might justify
austerity as “fixing the roof while the sun is shining”, the fund
team defines it as “curbing the size of the state … another
aspect of the neoliberal agenda”. And, they say, its costs “could
be large – much larger than the benefit”.
IMF managing
director Christine Lagarde with George Osborne. ‘Since 2008, a big
gap has opened up between what the IMF thinks and what it does.’
Photograph: Kimimasa Mayama/EPA
Two things need to
be borne in mind here. First, this study comes from the IMF’s
research division – not from those staffers who fly into bankrupt
countries, haggle over loan terms with cash-strapped governments and
administer the fiscal waterboarding. Since 2008, a big gap has opened
up between what the IMF thinks and what it does. Second, while the
researchers go much further than fund watchers might have believed,
they leave in some all-important get-out clauses. The authors even
defend privatisation as leading to “more efficient provision of
services” and less government spending – to which the only
response must be to offer them a train ride across to Hinkley Point
C.
Even so, this is a
remarkable breach of the neoliberal consensus by the IMF. Inequality
and the uselessness of much modern finance: such topics have become
regular chew toys for economists and politicians, who prefer to treat
them as aberrations from the norm. At last a major institution is
going after not only the symptoms but the cause – and it is naming
that cause as political. No wonder the study’s lead author says
that this research wouldn’t even have been published by the fund
five years ago.
From the 1980s the
policymaking elite has waved away the notion that they were acting
ideologically – merely doing “what works”. But you can only get
away with that claim if what you’re doing is actually working.
Since the crash, central bankers, politicians and TV correspondents
have tried to reassure the public that this wheeze or those billions
would do the trick and put the economy right again. They have riffled
through every page in the textbook and beyond – bank bailouts,
spending cuts, wage freezes, pumping billions into financial markets
– and still growth remains anaemic.
And the longer the
slump goes on, the more the public tumbles to the fact that not only
has growth been feebler, but ordinary workers have enjoyed much less
of its benefits. Last year the rich countries’ thinktank, the OECD,
made a remarkable concession. It acknowledged that the share of UK
economic growth enjoyed by workers is now at its lowest since the
second world war. Even more remarkably, it said the same or worse
applied to workers across the capitalist west.
Red Plenty ends with
Nikita Khrushchev pacing outside his dacha, to where he has been
forcibly retired. “Paradise,” he exclaims, “is a place where
people want to end up, not a place they run from. What kind of
socialism is that? What kind of shit is that, when you have to keep
people in chains? What kind of social order? What kind of paradise?”
Economists don’t
talk like novelists, more’s the pity, but what you’re witnessing
amid all the graphs and technical language is the start of the long
death of an ideology.
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